Is it better to buy property or not?

Hello,

my fiancée and I want to fulfill the dream of owning a home this year. We currently have €60,000 available, which would be just enough for the intended plot of land. Is it advisable to buy the land with the €60,000 and then go to the bank? Or does it make more sense to go to the bank and tell them we have €60,000 and would like to build.

We were advised against that. The bank couldn't care less what you paid; they appraise the land. And if they appraise the land at, for example, only €30,000, you would have been better off financing the house together with the land and contributing the €60,000 as equity.
Moreover, then you have to deal with the notary and land registry twice. Once when buying the land and registering yourselves, and once when registering the mortgage for the house.

That is really a great tip. I hadn’t thought about the double notary fees yet! Thank you! Does the bank really evaluate the property separately again? Even though the property is located in a new development area and the price per sqm is set by the municipality?

But keep in mind that you still need money to pay for certain things. You may also sometimes have to pay "in advance" until you receive money from the loan. For us at the Sparkasse, this was not critical, but I have heard otherwise.

Things like additional costs (e.g. surveying) or of course furnishings (furniture, kitchen...) cannot or should not be financed and should be paid with equity.

I would keep back at least 30,000, or save up again after purchasing the land!

That is truly a great tip. I hadn’t thought about the double notary fees yet! Thanks! Does the bank really assess the property separately again? Even though the property is located in a new development area and the price per sqm is set by the municipality?

Since it is set by the municipality, I actually can’t imagine that...

You’re probably even buying cheaper through a local resident model than at the usual market price in the area.

We were advised against it. The bank doesn’t care at all what you paid; they appraise the property. And if they appraise the property at, for example, only 30,000, you would have been better off financing the house together with the land and putting the 60k in as equity. Especially since then you have to deal with the notary and land registry twice. Once for the purchase of the land and your registration, and once for the registration of the mortgage on the little house.

It makes no difference. Whether you buy now for 60k and the bank only values it at 30k or you buy later and the bank still values it at 30k is six of one, half a dozen of the other.

Notary and land registry are also the same. Their fees are based on the transaction, and if you only have the ownership transfer activities carried out now and everything else is done later in connection with the mortgage registration, it comes out exactly the same if the land is paid in cash now.

However, it is important that with 60k cash assets you cannot pay a 60k purchase price because additional acquisition costs come on top that must be available in cash and occur promptly: property transfer tax, notary and office fees, and possibly a broker’s commission.

That's a great tip. I hadn't thought about the double notary fees yet! Thanks! Does the bank really appraise the property separately again? Even though the property is located in a new development area and the price per sqm is set by the municipality?

In the worst case, the bank simply takes the standard land value. If you are in a booming region and the value is a few years old, there can be a significant difference. Banks that are local and know the region might possibly rely on their own figures. A proper appraisal will probably not be done by any bank.

However, it is simply not guaranteed that the bank will consider the 60k you paid as 60k equity in the financing.

That is a variable that can jeopardize the entire project.